Hong Kong’s crypto exchange regulator has released new guidance allowing licensed exchanges to offer staking services, a move that contrasts with Singapore’s ban on retail staking and the U.S. SEC’s restrictive stance.
The Securities and Futures Commission (SFC) has issued new guidance allowing licensed crypto exchanges and funds to offer staking services. This move contrasts with Singapore’s ban on retail staking and the U.S. SEC’s restrictive stance.
To operate a crypto exchange, businesses must comply with anti-money laundering (AML) and know-your-customer (KYC) regulations.
Exchanges must also obtain licenses from regulatory bodies such as the Financial Crimes Enforcement Network (FinCEN) in the US.
In addition, exchanges must implement robust security measures to protect user funds, including multi-signature wallets and cold storage.
Compliance with these requirements is crucial for maintaining a legitimate business operation.
Key Requirements for Licensed Platforms
Licensed Virtual Asset Trading Platforms (VATPs) must retain full control of client assets and disclose all risks associated with staking. Platforms will also be required to transparently inform clients of the processes involved, fees, minimum lock-up durations, and arrangements for business continuity during disruptions.
Staking offers crypto holders a way of putting their digital assets to work and earning passive income without selling them. It is integral to Proof of Stake (PoS) networks as it provides security and immutability.
Regulatory Approach
The SFC‘s approach emphasizes the importance of regulating staking services in a controlled environment where client safety is paramount. Authorized virtual asset funds are mandated to stake only via licensed platforms or authorized institutions, with an enforced cap to manage liquidity risks.
This regulatory framework contrasts with Singapore’s ban on retail staking and the U.S. SEC’s restrictive stance. The move aims to balance the benefits of staking services with the need for investor protection.
Global Comparison
The SFC‘s guidance is part of its broader strategy to grow Hong Kong’s digital asset sector through its ‘ASPIRe’ roadmap. In contrast, Singapore banned retail staking in 2023 due to concerns over investor protection. The U.S. SEC continues to restrict staking through enforcement actions, although there are growing calls for a more relaxed stance.
Overall, the SFC‘s new guidance provides clarity on staking services for licensed platforms in Hong Kong, emphasizing the importance of transparency and regulatory oversight.
